Solar Loans: Lenders Offering Solar Panel Financing

Installing solar panels on your home is a great way to reduce your power bill and use renewable energy. Many homeowners use personal loans to purchase solar panels.

But before you take out a personal loan, you should compare it to other options, such as loans secured by collateral or loans extended directly from solar panel retailers. Personal loans may be a better deal for you, but they could also cost more in the long run, depending on your situation.

On this page:

• How Much Do Solar Panels Cost?
• Solar Financing With a Personal Loan
• Lenders That Offer Solar Loans
• Other Methods of Solar Financing

How Much Do Solar Panels Cost?

Solar panels can be expensive. As of January 2019, the average solar panel cost was $3.14 per watt, and the average panel system size needed for a moderate-sized home was six kilowatts or 6,000 watts. That means you can expect to spend about $13,188 on your system after accounting for tax credits. Solar panels are cheaper than they were a year or two ago, but that’s still a lot of money. You can lower that cost by being more frugal with your electricity needs, but you’ll still need to spend about $10,000.

The good news about solar panel systems is that you’d no longer have an electric bill, and in some cases can even sell power back to the utility company, resulting in a profit for you that may pay for the maintenance on your system.

The downside, however, is that depending on your location, terrain, and how often you have sunshine, a solar system may not generate enough power for your needs. You’ll need to understand exactly how much power you’re using and how much of a solar system you’ll need to match that. Then you’ll need to decide how you’ll fund what you need.

Solar Financing With a Personal Loan

Because personal loans are approved based primarily on credit score and income and aren’t designated for a particular purchase the way home equity loans are, they certainly can be used to purchase solar panel systems.

A personal loan is usually preferable to using a credit card to make large purchases because personal loan interest rates are likely to be lower, and some credit cards will not offer credit limits high enough to accommodate the purchase of a solar panel system.

However, because personal loans are a form of unsecured debt, the rates are typically higher than those found with secured loans. This is because if you default on a secured loan, the creditor can repossess the underlying collateral. The lender can then sell that collateral to pay off or pay down the remaining loan balance.

With a personal loan, there is no collateral, so the creditor agrees to more risk and charges correspondingly higher interest rates. The more of a risk you are based on your credit score and other indicators of financial health, the more you will pay in interest.

Whether you plan to use a personal loan or another type of loan to finance your solar panel system purchase, you will want to make sure that what you pay in interest does not completely cancel out the savings you expect to gain from using solar power.

Lenders That Offer Solar Loans

Some lenders offer solar loans that are sometimes considered home improvement loans, meaning they fund something that builds equity in your home, raising its value.

LightStream

A division of SunTrust Bank, LightStream personal loans come with a fixed rate for solar panel systems if you have a good credit history.

• Interest rates range from 7.84% to 13.04%
• Loan limits from $5,000 to $100,000 and terms of up to 84 months
• No fees or penalties
• Good to excellent credit needed

Home Loan Investment Bank

Home Loan Investment Bank can help you finance your solar project even if you don’t currently have any equity in your home.

• Interest rates determined by credit rating
• Loan limits up to $25,000
• No prepayment penalties, but does have an origination fee
• Fixed rates with good credit

Dividend

Dividend Finance offers 0% down loans geared to match your needs for solar.

• Fixed rates dependent on creditworthiness
• Loan limits based upon the system you choose
• No prepayment penalties or lien on your home
• Only available in some states

SoFi

SoFi personal loans are typically offered to borrowers with excellent credit.

• Unsecured loans up to $100,000
• No fees of any type
• Rates start at 6.79% fixed or 6.54% variable APR
• Terms up to seven years

LendingTree

LendingTree is another loan marketplace that can help you find an unsecured personal loan to pay for your solar power system.

• Loans up to $50,000
• Rates start at 4.69% APR but run up to 35.99% APR depending on credit
• Terms go from three months to 15 years

Other Methods of Solar Financing

There are other ways to finance your solar project if you aren’t sold on the idea of an unsecured personal loan.

Home Equity Line of Credit (HELOC)

A HELOC uses your home to secure a line of credit. You can borrow only what you need, repay it, and then borrow again later. It’s a great way to finance your home improvement project and get the solar power you need.

Home Equity Loan

Home equity loans use the value of your home as collateral. You can generally borrow 100 percent of your equity up to 80 percent of the appraised value of your home. The funds are disbursed in one lump sum, and then repayment begins like a regular installment loan.

Cash

The old standby method of paying for anything, including a new solar system, is saving the cash to do it. You can keep the money in an interest-bearing account while you save and add to it each month or each paycheck.

Using the cash method means you will not have loan payments. Once you buy your system, it’s yours free and clear, with no additional fees or interest to pay. This will take a lot of saving, but it may be worthwhile if you’re able to quickly improve your energy efficiency.

Leasing

Some manufacturers of solar equipment will offer a solar lease for a fixed rate per month. One of the biggest benefits to solar leasing is that the manufacturer will do the solar installation and maintenance it for you. You can pay a fixed rate for solar energy, and you keep any additional generated energy for free.

You can also prepay up to 20 years of energy, which means no more electric bills at all for two decades. Before choosing this option, make sure you understand the true savings and costs. Leasing doesn’t always save everyone money in the long run, and you don’t own the panels when your lease ends.

Bottom Line

Remember, there are many options available to you if you’re looking to go solar, including leasing or taking out a personal loan or secured loan. Unlike many other investments, with a solar panel system, you should expect to see immediate returns on your investment by saving money on your monthly electricity bill.

And with so many options available, it’s a good idea to shop around for the best rates and loan terms. Compare the best personal loans available to you from all lenders, including banks, credit unions, and solar retailers.